Best Affirms W.R. Berkley (Europe) ‘A’, ‘aa’ Ratings

August 12, 2005

A.M. Best Co. announced that it has affirmed the financial strength rating of “A” (Excellent) and the issuer credit rating (ICR) of “a” for U.K.-based W.R. Berkley Insurance (Europe), Limited, with a stable outlook.

“The ratings reflect WRB’s strong capitalisation and support from its ultimate parent, W.R. Berkley Corporation (United States),” said Best. “The ratings also reflect its strong business profile in the UK professional indemnity (PI) market, as well as its strong financial performance.”

Best said it “believes WRB has a strong risk-adjusted capitalisation benefiting from a net worth maintenance agreement (NWMA) issued by the parent and is expected to remain strong as high earnings compensate for the increased capital requirements from the growing book of business.”

The rating agency also indicated that it expects “to see a growth of approximately 6 percent in the core account (primarily PI) to GBP 65 million (USD 115 million) in 2005 (despite the more competitive PI rates) due mainly to the increased business likely to be written, especially within the regional small-to-medium enterprise (SME) market.” It also expects “WRB’s participation in the consortium with R.J. Kiln & Company Limited (United Kingdom) on property reinsurance business to contribute approximately GBP 21 million (USD 37 million) to gross written premium in 2005.”

Best forecasts WRB’s financial performance to remain strong, “resulting in a return on premium of approximately 15 percent despite a decrease in after-tax profits of between 10 percent and 15 percent in 2005 (GBP 6 million (USD 11.5 million in 2004)).” Best also expects that the rate reductions across the book of up to 5 percent, combined with the increased capacity in the PI market, will lead to a deterioration in the overall combined ratio by approximately 8 percent to 95 percent in 2005.”

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